• McKinsey Growth Pyramid

    The McKinsey model is an important model to develop the proper strategic to attain future growth. It states that businesses should develop their growth strategies based on the below parameters

    • Operational skills
    • Privileged assets
    • Growth skills
    • Special relationships

     These parameters are explained below:

    1. Operational skills lead to operational efficiency and higher operating profit which can further help to achieve faster growth in future.
    2. Privileged assets are the assets held by the company which helps them achieve competitive advantage over the competitors. The main privileged assets are Patents, well established brands, customer database and highly knowledgeable human resources.
    3. Growth skills are required to manage and lead the growth strategy and these include the skills of new product development, expanding into new region, increasing market area and merger and acquisitions skills.
    4. Special relationships help to attain higher growth by leveraging the relationships with the trade union, government bodies, trade bodies etc. It helps to faster approval of policies and transactions which helps to achieve faster growth in the future.

    Growth can be achieved by looking at business opportunities along several dimensions. All the business opportunities along with risks are pointed in the diagram

    McKinsey Growth Pyramid

    The model outlines seven ways of achieving higher growth in the competitive environment. All the ways are explained below

    Existing products to existing customers

    Increase sales to the existing customer base by improving quality and other additional features. This is all about increasing the frequency of purchase and maintaining customer loyalty which is the lowest risk option to achieve faster growth.

    Existing products to new customers

    Sell the existing product to new customers by increasing advertising and promotional activities. This can be done by selling products to the customers of the competitors or customers in some new regions. This is a risky option and does not always guarantee success.

    New products and services

    Faster growth rate can be achieved by introducing new products or services in the existing or new market. It can be done in two ways

    • New products can be developed based on the demand of the new customer base and sold to those new customers. It also helps to increase the customer base.
    • Some new products can be sold to the existing customers who already trust the existing brand and value the relationship.

    Companies with high brand value can easily use the second option to increase product sales and achieve faster growth.

    New delivery approaches

    The companies can explore and use new distribution channels or new delivery approaches to increase sales volume. Increase in distribution network in already untapped regions helps to boost sales in the same region.

    Also new delivery approaches increase sales for Services companies and help them to achieve faster growth rate.

    New geographies

    The companies can consider new geographies to expand their business and boost sales. It is one of the most powerful options for growth as it provides immediate results but also it is very difficult option due to cultural differences involved in different geographies and added country risk.

    New industry structure

    Companies can achieve growth by acquiring troubled competitors or consolidating the industry through merger and acquisitions. Inorganic growth is a very effective medium to achieve faster growth rate.

    New competitive arenas

    Companies can integrate different business verticals to exploit the different opportunities available in different sectors.  It can also use skill of one particular sector to another sector in order to improve the delivery capabilities and quality. Integrating different business can improve the service quality significantly.

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